Financial Instruments, Institutions and Markets

(b) The US Government wanted to auction $600 million worth of 1-year Treasury Bills. Bids for $100 million worth of Treasury Bills were submitted on a non- competitive basis. Institution Bank 1 Bank 2 Bank 3 Bank 4 Bank 5 Bank 6 Bank 7 Amount Bidded $50 m $50 m $50 m $150 m $50 m $100 m $150 m Yield 2.25% 2.00% 2.00% 1.75% 1.50% 1.25% 1.00% Based on the bids submitted, use a table, to determine: (i) the stop-out yield that all successful bidders will receive for the Treasury Bills they bid, and (ii) the amount of Treasury Bills allocated to Bank 2 (8 marks)